Pakistani company forging ahead with Posey plans | TIMELINE

Oct. 3, 2008: Heartland Disaster Tax Relief Act of 2008 becomes law. Tax-exempt bonds are available for economic development projects in disaster areas declared between May 20, 2008 and Aug. 1, 2008. Indiana is approved for $3 billion in bonds.

September 2011: Lt. Gen. Michael Barbero urges top leaders at Pakistani company Fatima Group to help reduce the illicit use of their ammonium nitrate fertilizer in explosives. Barbero is the director of the Joint Improvised Explosive Device Defeat Organization (JIEDDO).

Dec. 13: Sen. Bob Casey (D-PA), chairman of the Senate Foreign Relations subcommittee for Near Eastern and South and Central Asian affairs, chairs a hearing on efforts to reduce IED activities. Barbero testifies that he has not had contact with Fatima Group since September 2011 and describes them as "less than cooperative" in helping prevent their product from being used in explosives.

Dec. 19: Midwest Fertilizer Corp. and the Ports of Indiana enter into an agreement that gives Midwest an option to purchase a 250-acre site from the Ports of Indiana.

Dec. 20: All fertilizer bonds are sold in $100,000 denominations, 11 days before the disaster bond program expires.

2013

Jan. 12: IEDC learns about Barbero's testimony

Jan. 14: Pence instructs IEDC to suspend state support for the fertilizer project.

Jan. 15: In a letter, IEDC tells Fatima that Barbero's December remarks "place the entire IEDC project in jeopardy," and "any misunderstanding between Lt. Gen. Barbero and Fatima needs to be resolved very quickly for the sake of the opportunity."

Feb. 1: Pence issues statement announcing the state has suspended its role in the project.

Feb. 5: Fatima says it is "collecting the facts to respond to the concerns that have been expressed."

Feb. 14: Barbero and Fatima exchange letters thanking each other for meeting together. Both letters mention Fatima's efforts to develop a new fertilizer formula that would render the product less effective in explosives. Both parties mention Fatima's pledge to suspend sales of ammonium nitrate fertilizer in Pakistan/Afghanistan border provinces.

Feb. 19: Fatima writes Barbero, saying "as of today" it has suspended all sales of ammonium nitrate fertilizer products in the two provinces bordering Afghanistan. Letter is copied to Sen. Robert Casey.

March 6: Sen. Casey releases a statement saying he's received commitments from Fatima about suspending border province sales and a fertilizer buy-back program. Casey describes these as "very positive developments." He also mentions Fatima's efforts to develop a new formula for its fertilizer. The Fatima Group issues its own statement thanking Casey for his recognition.

July 1: This is the earliest date that Midwest Fertilizer Corp. will have access to bond proceeds. Assuming the company has met the conditions of the bond agreement, the bond proceeds will be released to the company. At this point the bonds will be resold to new investors as long-term securities.

While Gov. Mike Pence is still hitting the pause button on a proposed Posey County fertilizer plant, the project's developers are lobbying federal, state and local officials to move the project forward — and proceeding as if the answer is yes.

The project hit a stumbling block in mid-January, after Pence learned of security concerns involving the company pushing the project, Pakistan-based Fatima Group.

Fatima has fertilizer factories in Pakistan, and the company's ammonium nitrate fertilizer from those plants has made its way into improvised explosive devices in Afghanistan, the same bombs that have killed many U.S. troops.

Fatima Group's U.S. adviser, Houston attorney Tom Campbell, said the company is moving ahead with confidence as it works to address that issue.

"We're very optimistic. We believe this is good for Indiana, good for Indiana farmers, and that the case for allowing this plan to go forward is compelling," Campbell said. "We've had the support of the state in the past and we expect to have it in the future."

Construction at the Port of Mount Vernon could begin this year, Campbell said, creating 2,500 construction jobs over three years and a permanent plant workforce of 300 or more.

Activity on the project was accelerating in recent months until state officials hit the brakes.

The group planning to build the plant is Midwest Fertilizer Corp., an entity Fatima Group established last September.

The Indiana Economic Development Corp. authorized an incentives package for the company in November, though the agency has not revealed details on the incentives or their value.

In December, the Indiana Finance Authority issued $1.3 billion in bonds to help finance the project. That money is currently in escrow and will become available to Midwest Fertilizer pending its completion of certain conditions.

"We are optimistic that the necessary conditions for construction can be met by July 1, 2013, which will allow the funds to be released for construction," Campbell said.

But in the same month that the bonds were issued, a U.S. military official made some public remarks about Fatima Group that led to Pence's uncertainty.

Lt. Gen. Michael Barbero testified before Congress in December that he'd come to view Fatima Group as "less than cooperative" in efforts reduce the misuse of its fertilizer.

Barbero's comments drew the attention of Gov. Mike Pence, and on Jan. 14 he instructed the IEDC to suspend state support for the project.

Pence's stance hadn't changed on Friday, when he visited Evansville and spoke at a Chamber of Commerce of Southwest Indiana luncheon.

After the luncheon, Pence said state support for the fertilizer project remains on hold.

"We continue to evaluate the appropriateness of Indiana's involvement in that project. Economic development is important, but as every Hoosier agrees, the safety and security of our troops is more important."

Noting that he recently met with Barbero in Washington, D.C. for a briefing on the issue, Pence said his office is "leaning very heavily on the counsel and direction of our military experts."

Fatima changing its product

Campbell said Fatima has taken significant steps to address Pence's security concerns.

For more than 18 months, Campbell said, Fatima has worked to develop a formula that makes its ammonium nitrate fertilizer ineffective as an ingredient in explosives.

The company believes it has come up with such a formula, Campbell said, and it invited U.S. Department of Defense scientists to come to Pakistan to test the new product. That could happen in several weeks, Campbell said, and the next step would be testing in the U.S.

If the new formula tests out, Campbell said, it would also be available to fertilizer companies around the world.

"This has the real promise of saving thousands of lives, and not just in Pakistan and Afghanistan but anywhere where ammonium nitrate fertilizer is used."

Fatima has also improved its product distribution protocol to reduce the chance that fertilizer reaches the wrong hands, Campbell said. The company has also ceased selling ammonium nitrate fertilizer in the Pakistani provinces that border Afghanistan — an area that represents about half of Pakistan, Campbell said.

In a letter dated Feb. 19 that Campbell provided to the Courier & Press, Fatima Group Chairman Fawad Ahmed Mukhtar wrote to Barbero confirming its new distribution protocol and the company's work to develop a nonexplosive replacement.

"My team and I remain available to you at all times should you need anything at all," Mukhtar wrote.

And on Wednesday, Sen. Bob Casey (D-Pa.) released a statement of his own. Casey is the chairman of the Senate Foreign Relations Subcommittee on Near Eastern and South and Central Asian Affairs. He was the legislator who convened the congressional hearing at which Barbero testified.

In his statement, Casey said he'd been in contact with Fatima Group owners in recent weeks, and that their product control efforts were "very positive developments." Casey also noted Fatima's work on the new fertilizer formula.

These developments, Campbell said, should give Indiana enough confidence to move ahead with the Posey County plans.

"I think what the governor wanted to see was assurances from the general and assurances from Sen. Casey," Campbell said. "I think in these two documents, he's received it."

Problems by association

Fatima is a business that operates independent of the Pakistani government, Campbell said, but he acknowledged that this distinction sometimes is lost on observers.

"We have a challenge in that sometimes the Fatima Group is associated with Pakistan. We're not able to control what the Pakistani government does or the U.S. government does. All the Fatima Group can do is control its product to make it as safe and as least susceptible to misuse as possible."

"This (company) is a good, good group of people who are trying hard to do the right thing."

State support of the project is crucial to its moving forward, Campbell said.

"We need to have the total package, which includes the support of the state and local community. We want this to be a success for the community, and we want it to be a success for all of the investors. In order for that to happen, we all have to work together."

Campbell also noted that the project can't remain in limbo indefinitely.

"We haven't communicated a drop-dead deadline, but we have communicated that time is of the essence."

The project involves multiple investors, Campbell said — the bond holders, but also an "international consortium" of other investors from Europe, Japan and Singapore.

Investors won't want to stay involved with a project indefinitely without signs of progress, Campbell said.

"At some point, the other members of the consortium become discouraged, and they have other options."

"If we want to attract top-quality management, we have to be able to show them that this project is a good strong project."

Pence said Friday that he understands the company's concerns.

"There's some relevant timing with regard to various aspects of that deal, and we're sensitive to that timing," the governor said.

But concerns of timing, Pence said, won't trump safety concerns in his decision.

Pence did not give a timeline for when his office might make up its mind.

Greg Wathen, president and chief executive officer of the Economic Development Coalition of Southwest Indiana, said his organization is playing a part in collecting information for the state's decision.

"The due diligence is continuing," Wathen said, and no decision will happen until that process has concluded.

Wathen would not say what more is left to do in the due diligence process.

Why Posey County?

A combination of factors make Posey County appealing for large-scale manufacturing projects, Wathen said.

Those factors include its location, especially its proximity to the Ohio River; the Port of Mount Vernon and its infrastructure; the availability of large tracts of land; competitive industrial utility rates; and available natural gas infrastructure. Natural gas is an ingredient in fertilizer manufacturing.

Wathen and Campbell said the Posey County project is among similar projects popping up because of recent natural gas innovations.

Hydraulic fracturing, or "fracking," makes it possible for companies to extract natural gas deposits that were previously considered unreachable. The result: an abundant supply of natural gas.

"There are about 20 of these fertilizer project being shopped around the U.S.," Wathen said, adding that probably only a handful of the projects will come to fruition.

"It's not a question of whether they'll be built — it's where," Campbell said.

And Campbell said he's "quite simply committed" to making Posey County one of those sites. This project could be ready to go in September of this year. Everything is in place, if we can straighten out some of these apprehensions."